The major pairs (except the USD/CAD) zoomed out of control today on the Non Farm Payroll report. We saw a big gain in the EUR and GBP, in the CHF, and especially in the CHF. But can this be sustained? I am not sure -- I think we need to pay attention to the fact that we've had a 1,000 pip runup in the GBP/USD alone in the last three weeks.
It's time for at least a bit of a reversal. It does not have to be a huge one, but we have a perfect opportunity next week to see one:
1. Ben Bernanke and the recently discredited Fed are going to have to prove that they are the real deal when they make their interest rate hike on Wednesday May 10.
2. The FOMC statement is likely to say "we are still watching the US economy and we'll raise interest rates if needed," and while this is not super bullish for the USD, the possibility that more rate hikes are coming should cool off the GBP and others before Wednesday.
3. Watch for a reversal in the GBP, EUR, JPY, and CAD before Wednesday, of about 100-150 pips, as traders clear out positions ahead of the report so they don't get caught with their pants down.
